DJs Gets First Half Profit Boost

Upmarket retailer David Jones  has posted a 30 per cent lift in first half earnings, after a bumper Christmas trading period, and reaffirmed its guidance for this year and the year ahead.

The result was driven by the very strong performance of its core chain store business, as overall costs fell and margins improved.

The companys net profit was $71.06 million, before the positive impact of the unwinding of sale and leaseback arrangements on its flagship stores in Melbourne and Sydney.

Including that one-off impact, net profit was $170.34 million, up 212.6 per cent, as revenue rose 7.6 per cent to $1.08 billion.

We are pleased with this performance, chief executive Mark McInnes said.

David Jones said trading in the first seven weeks of the third quarter of this year was broadly in line sales growth of 8.9 per cent for the second quarter.

Although we have had an encouraging start to the winter season, we are a trading business and as such we prefer to trade through a significant part of second half 2007 before updating our existing guidance, Mr McInnes said.

The company expects to see like-for-like sales growth of 5.4 per cent in the fourth quarter.

The company reaffirmed its guidance for underlying profit after tax growth in the second half of 8.5 per cent to 13.5 per cent.

David Jones reaffirmed also its expectation to deliver underlying profit after tax growth of five to 10 per cent in fiscal  2008.

We believe our company has a bright future with many opportunities available to it, Mr McInnes said.

We have a proven business model, strong cashflows, a productive balance sheet, now that our flagship Sydney and Melbourne CBD properties are fully owned, and a strong management team.

We are well positioned to continue our track record since 2003 of delivering year-on-year growth in shareholder returns.

David Jones said its first half underlying result was the highest since the retailer listed in 1995.

It was driven by the strong performance of its core department store business, which reported a 44.1 per cent increase in earnings before interest and tax (EBIT) to $93.3 million.

Its financial services generated a 6.1 per cent increase in EBIT to $17.3 million, despite an environment of higher funding costs.

Group EBIT was $110.6 million, up 36.4 per cent.

David Jones gross profit margin also improved to 39.5 per cent, from 39 per cent.

Its cost of doing business percentage fell to 30.5 per cent, from 31.2 per cent.

Mr McInnes also said the competitive environment for department store retailers has undergone significant restructure since Coles Group Ltd sold its Myer chain last year to a consortium led by private equity firm Newbridge Private Equity.

In recent years we have seen a reinvigoration of the Australian department store sector - in particular its relevance and prominence to consumers has been enhanced, he said.

The new ownership of Myer has enhanced this reinvigoration and has resulted in more rational decision making than was previously the case.

There will be medium to long term benefits flowing to shareholders from the industry restructure from areas like media, supplier terms and the redevelopment of Myer Melbourne, as well as ongoing brand and store expansion opportunities.

David Jones declared an interim dividend of nine cents for the half year ended January 27, up from seven cents in the previous corresponding period.

AAP

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